Recently, the news that China may lift its ban on cryptocurrencies in the fourth quarter of 2024 has sparked heated discussions in the cryptocurrency community. The news was initially revealed by Galaxy Digital General Manager Mike Novogratz, who said he had heard of such reports twice in recent weeks and said that if true, it would be "a big deal" in the cryptocurrency world.
Looking back, China was once an important center for cryptocurrency mining and trading, but the government's attitude towards the industry has always been harsh. In 2013, China banned financial institutions from participating in Bitcoin trading. Since then, a series of regulatory measures have been introduced to curb the expansion of the cryptocurrency market. For example, in 2017, China further banned initial coin offerings (ICOs) and closed domestic cryptocurrency exchanges. In 2021, China completely banned cryptocurrency mining and related transactions, causing a sharp drop in the market value and price of Bitcoin.
However, despite the strict regulation, the demand for cryptocurrencies among the Chinese people remains high. Many Chinese users have found alternative channels to participate in cryptocurrency transactions, such as using overseas exchanges and underground markets to bypass the ban. At present, China still maintains a global leading position in Bitcoin mining and other crypto activities. Therefore, some analysts believe that in order to meet market demand, the Chinese government may be reconsidering its stance on cryptocurrencies.
Lifting the ban on cryptocurrencies could be part of a broader strategy to embrace blockchain technology and digital assets. If China reenters the cryptocurrency market, it could spark a surge. At the same time, embracing Bitcoin could also consolidate China's position in the global fintech landscape and enhance its international trade capabilities.
However, the cryptocurrency community has had mixed reactions to the news. Optimists believe that the potential lifting of the ban shows that China has realized that Bitcoin mining can balance the power grid and make it more resilient during peak loads. Because greening the power grid is one of the main contents of the current five-year plan, and allowing all remote areas to mine Bitcoin with renewable energy is the key to profitability. In addition, the Chinese government has also been researching and developing its own digital currency, the digital yuan. This shows that China is still paying close attention to the developments in the cryptocurrency field.
On the other hand, pessimists believe that cryptocurrencies further democratize finance and enable capital flight for the middle and low-income groups. The main purpose of China's ban on cryptocurrency trading and mining is to prevent capital outflows and stabilize foreign exchange. Given the current economic situation and the RMB-USD exchange rate, it is highly unlikely that the ban will be lifted. This rumor may have been spread just to manipulate the market. However, some people refuted this by saying that why mainland China opposes cryptocurrencies, but Hong Kong, China, actively accepts them, and this may be the first step for mainland China to lift the ban.
Interestingly, China’s Bitcoin holdings were also mentioned in the discussion. It is reported that after China’s cryptocurrency trading was banned, China confiscated about 190,000 Bitcoins, but has not made any further disposal of these cryptocurrencies. Mainland China has banned certain activities related to Bitcoin many times, but somehow it is still a major player in activities such as Bitcoin mining.
The whereabouts of these confiscated bitcoins are currently unknown, and the cryptocurrency community has always had questions. Some analysts believe that the Chinese government may use these bitcoins for the development of the central bank's digital currency, or transfer them to other countries for profit. Other analysts believe that China may be quietly holding these bitcoins as part of its national reserves.
In general, China's ban on cryptocurrencies has always been a hot topic in the industry. The news that China has lifted the ban on cryptocurrencies is still unknown, and the source lacks reliable evidence. It is unlikely that the Chinese government will significantly relax its regulation of cryptocurrencies in the short term.
However, China is indeed one of the most important "hidden" players in the cryptocurrency industry. Once the Chinese government relaxes its control over cryptocurrency, it will have a profound impact on the entire industry. So although the possibility is small, China's future cryptocurrency policy direction is still worth paying close attention to.